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How Private Creditors Fared in Emerging Debt Markets, 1970-2000

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Author Info

  • Klingen, Christoph
  • Weder di Mauro, Beatrice
  • Zettelmeyer, Jeronimo

Abstract

We estimate ex post returns to emerging market debt by combining secondary-market prices with observed flows based on World Bank data. From 1970–2000, returns averaged 9% per annum, about the same as returns on a ten-year US treasury bond. This reflects the combined effect of the 1980s debt crisis and much higher returns during 1989–2000. Annual returns since 1986 have been less volatile than emerging market equity returns but more volatile than returns on US corporate or high-yield bonds. Unlike returns on these bonds, however, emerging market debt returns do not seem significantly correlated with US or world stock markets.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4374.

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Date of creation: May 2004
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Handle: RePEc:cpr:ceprdp:4374

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Related research

Keywords: crises; returns capital flows; sovereign debt;

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References

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  1. Goetzmann, William N. & Jorion, Philippe, 1999. "Re-Emerging Markets," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 34(01), pages 1-32, March.
  2. Edwin J. Elton, 2001. "Explaining the Rate Spread on Corporate Bonds," Journal of Finance, American Finance Association, vol. 56(1), pages 247-277, 02.
  3. G. Andrew Karolyi & Rene M. Stulz, 2002. "Are Financial Assets Priced Locally or Globally?," NBER Working Papers 8994, National Bureau of Economic Research, Inc.
  4. Rogoff, Kenneth, 1990. "Symposium on New Institutions for Developing Country Debt," Journal of Economic Perspectives, American Economic Association, vol. 4(1), pages 3-6, Winter.
  5. Harvey, Campbell R, 1995. "The Risk Exposure of Emerging Equity Markets," World Bank Economic Review, World Bank Group, vol. 9(1), pages 19-50, January.
  6. Giovanni Dell'Ariccia & Jeromin Zettelmeyer & Isabel Schnabel, 2002. "Moral Hazard and International Crisis Lending: A Test," IMF Working Papers 02/181, International Monetary Fund.
  7. K. Rouwenhorst, 1998. "Local Return Factors and Turnover in Emerging Stock Markets," Yale School of Management Working Papers ysm97, Yale School of Management, revised 01 Mar 2001.
  8. Michael Dooley & Richard D. Haas & Steven Symansky, 1993. "A Note on Burden Sharing among Creditors," IMF Staff Papers, Palgrave Macmillan, vol. 40(1), pages 226-232, March.
  9. Bulow, Jeremy & Rogoff, Kenneth, 1990. "Cleaning Up Third World Debt without Getting Taken to the Cleaners," Journal of Economic Perspectives, American Economic Association, vol. 4(1), pages 31-42, Winter.
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Citations

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Cited by:
  1. Sandra Lizarazo, 2009. "Default Risk and Risk Averse International Investors," Working Papers 0907, Centro de Investigacion Economica, ITAM.
  2. Ricardo Hausmann and Federico Sturzenegger, 2006. "Global imbalances or bad accounting? The missing dark matter in the wealth of nations," Business School Working Papers globalimbal, Universidad Torcuato Di Tella.
  3. Michael Tomz & Mark L. J. Wright, 2012. "Empirical research on sovereign debt and default," Working Paper Series WP-2012-06, Federal Reserve Bank of Chicago.
  4. Jeanne, Olivier & Rancière, Romain, 2008. "The Optimal Level of International Reserves For Emerging Market Countries: A New Formula and Some Applications," CEPR Discussion Papers 6723, C.E.P.R. Discussion Papers.
  5. Adam, Klaus & Grill, Michael, 2012. "Optimal Sovereign Default," CEPR Discussion Papers 9178, C.E.P.R. Discussion Papers.
  6. Juan J. Cruces & Christoph Trebesch, 2011. "Sovereign Defaults: The Price of Haircuts," CESifo Working Paper Series 3604, CESifo Group Munich.
  7. Fernando Broner & Guido Lorenzoni & Sergio L. Schmukler, 2011. "Why Do Emerging Economies Borrow Short Term?," Working Papers 308, Barcelona Graduate School of Economics.
  8. James M. Boughton, 2005. "Does the World Need a Universal Financial Institution?," IMF Working Papers 05/116, International Monetary Fund.
  9. Ashoka Mody, 2004. "What is an Emerging Market?," IMF Working Papers 04/177, International Monetary Fund.

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